What Is Earnest Money?

 How Earnest Money Works

Here’s the basic flow:

1. You make an offer on a home

2. You include an earnest money deposit

3. The money is held in an escrow account (neutral third party)

4. It stays there until closing

👉 It’s not paid directly to the seller right away.

💰 How Much Is Earnest Money?

Typical range:

• 1%–3% of the purchase price

Example:

• ₱5,000,000 home → ₱50,000–₱150,000 deposit

👉 In competitive markets, buyers may offer more to stand out.

🔑 What Happens to the Money?

✔️ If the deal goes through:

• It’s applied toward your:

  • Down payment

  • Closing costs

👉 You don’t lose it, it’s part of your purchase.

❌ If the deal falls through:

It depends on the reason.

You usually get it back if:

• Inspection reveals major issues

• Financing is denied

• Appraisal comes in low (depending on contract)

👉 These are called contingencies.

⚠️ You may lose it if:

• You back out for no valid reason

• You miss contract deadlines

• You waive contingencies and cancel anyway

👉 In that case, the seller may keep the deposit.

🧠 Why Earnest Money Matters

For sellers, it shows:

• Commitment

• Financial capability

• Lower risk of deal falling apart

👉 Stronger deposit = stronger offer.

⚖️ Earnest Money vs Down Payment

Many buyers confuse these.

• Earnest money → deposit to secure the deal

• Down payment → larger amount paid at closing

👉 Earnest money becomes part of your down payment later.

⚠️ Common Mistakes

• Offering too little (weak offer)

• Not understanding refund conditions

• Missing deadlines tied to contingencies

🏁 Final Thought

Earnest money is not an extra cost.It’s a commitment deposit that protects both you and the seller.

👉 If you follow the contract properly, you’re usually safe.